Bordeaux activity was down this week to 66.1%, but the Fine Wine 50 was stable, closing Thursday on 334.23 (+0.1%). Trade for the First Growths was particularly low, with the wines only taking 14.3% share of trade. However, Champagne activity climbed to 7.1% and Italy and Burgundy both saw an increase in trade.

Sauternes and Champagne dominated trade. Yquem 2009 was the third most traded wine by value. Neal Martin awarded the wine 100 points and described it as “a star that will blaze brightly and undimmed for many years”. Salon, Mesnil 2002 and Krug 2002 also featured in the top ten.

Pichon Lalande 2010 saw a flurry of activity this week and traded at its highest value for five years. The wine has seen a sharp price increase since the beginning of the year and was the top traded wine by value this week.

In 1533, civil and criminal court clerk, Jean de Pontac purchased the deeds to Haut Brion. However, the estate did not begin to gain an international reputation until 1660, when the cellar book of King Charles II of England notes the purchase of “169 bottles, in a single shipment, of Hobrion [Haut Brion] […] at the price of 21 shillings and 4 pennies per bottle”. This was the name by which the wine would come to be known.

The property remained in the Pontac family until 1749 when it was inherited by Joseph de Fumel. After the fall of Bastille in 1789, Fumel was elected Mayor of Bordeaux. However, in 1794 he was arrested and guillotined by the revolutionaries, who confiscated Chateau Haut Brion.

In 1855 Haut Brion was listed as one of the four First Growths, along with Margaux, Lafite and Latour. Joseph’s grandson Eugene took over the family estate in 1873, before famously stating that “phylloxera will not dare show its face here!” The pest then devastated the vineyard in 1880, forcing Eugene to completely reconstruct his vines using Vitis Riparia rootstocks.

After several years between hands, Haut Brion was sold to the American Clarence Dillon in 1935. Clarence appointed his nephew Seymour Weller to oversee the property. Clarence’s granddaughter, Joan Dillon, succeeded Seymour Weller in 1975. After a previous marriage to Prince Charles of Luxembourg, Joan married Philippe de Noailles, the duc de Mouchy. While Philippe served as managing director from 1979-1983, Joan remained the owner of the estate. Joan’s son from her previous marriage, HRH Prince Robert of Luxembourg was named managing director of Chateau Haut Brion in 2002 and took over ownership of Domaine Clarence Dillon from his mother in 2008.

Market Performance

The Haut Brion index – which tracks the price movements of the last ten physical vintages – is up 31.7% since the market’s low in July 2014. This makes Haut Brion the second best performing First Growth since the turn of the market, pipped only by Mouton Rothschild which is up 35.4%.

Market Value

Out of the First Growths, Haut Brion has the highest average score across the ten most recent physical vintages and the most 100-points scoring wines, but it also has the lowest average Market Price. This gives Haut Brion the lowest POP* score, Liv-ex’s loose measure of value, where the lowest POP indicates the greatest value for money.

Looking at individual wines, Haut Brion dominates the table of those appearing to offer best value. Of the ten wines with the lowest POP scores, six are Haut Brion vintages, two are Margaux and two are Mouton Rothschild. The top spot – the wine appearing to offer the best relative value – is taken by Haut Brion 2012. It has a POP of 188.6. By way of comparison, the wine with the highest POP is Latour 2010: with 100 points and a market price of £10,750, its POP score is 537.5.

The chart above compares First Growth Market Prices against their Wine Advocate scores. The trend line highlights the relationship between score and price. Wines below the trend line appear to offer better value, for example Haut Brion dominates below the trend line and the 2012 vintage appears to offer the best value.

Acclaimed vintages

Haut Brion is the only First Growth to score 100 points for all three of the great vintages – 2005, 2009, 2010 – of the last ten years. There is a very clear difference in price between Haut Brion in these vintages and those from ‘off’ years, with ’05, ’09, and ’10 priced in the range of £6,200-£6,430, and all other physical vintages below £3,450.

The recently released 2015 sits between the “great” years in terms of price, and followers of Neal Martin might find value here. Martin awarded the 2015 vintage 98-100 points in barrel and described the wine as ‘a veritable kaleidoscope of aromas’.

Of the recent vintages, 2013 and 2008 have been the top performers over the past 12 months, up 42.1% and 35.3% respectively. The 2014 followed close behind with a 35.1% increase. Despite the percentage increases, these continue to be among the cheapest vintages on the market. The 2012 has the smallest increase in price, but was already trading at the highest vintage price (except for the great vintages) a year ago.

*A wine’s POP score is its price-over-points ratio, our loose measure of value. It is calculated by dividing the price of a nine-litre case of wine by a shortened 20-point score (scores from The Wine Advocate). We have calculated this 20-point score by simply subtracting 80 from the official rating (for barrel-score spreads we use the mid-point of the score), on the basis that any wine under 80 points is unlikely to attract a secondary market. In theory, the lower the POP score the better value a wine is.

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Containing all the latest Liv-ex research and analysis, the full issue includes:

November gains

Liv-ex 100 – at its highest level in five years

Rhone 2015: Jancis vs. Jeb

Italian strength

Final thought: Sauternes

To access the full report, please log in or subscribe to Cellar Watch.

You can download page one – with charts and data – here, or read the text below:

November gains

Trade this month was down on October by both value and volume, but still high compared to 2015. The pace of the market appears to be slowing slightly and there seems to be no set pattern in movers. Overall the market strength appears robust, (market is up despite Sterling strength) but as we head towards 2017, it remains to be seen whether the long period of sustained rises will continue.

Lafite leads

Lafite Rothschild was the most traded wine this month. It accounted for 9.5% of market activity followed by Carruades Lafite (8.2%) and Mouton Rothschild (7.0%). 2013, 2010 and 2014 were the most traded vintages. 2009 and 2012 were also active. Carruades Lafite 2014 saw high levels of trade activity by both value and volume, as the stock became physically available.

Italian strength

After a quiet October for the region, activity for Italy picked up in November: it accounted for 8.7% of trade by value compared to 3.9% the previous month. Leading the charge were Sassicaia, it’s second wine Guidalberto and Altesino, Brunello Montalcino. Trade for Burgundy took a steady 7.5%, while Bordeaux dipped slightly this month from 76.2% to 73.1%.

Index records

November was another strong month for the Liv-ex indices. The Liv-ex 1000 has now reached record highs for four consecutive months, closing at 296.6. The Champagne 50 and the Burgundy 150 were the biggest movers of the sub-indices, up 3.9% and 2.5% respectively. The Liv-ex 100 increased for the twelfth consecutive month, closing at 296.1. It is currently at its highest level in five years.

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Last week, Liv-ex published the first part of an interview with CEO of Masseto and Ornellaia, Giovanni Geddes da Filicaja. In it, he discusses business strategy and the fine wine market. In the second part, below, Giovanni shares his views on pricing wine, Parker’s retirement and the Vendemmia d’artista project.

When were the first vintages of Masseto and Ornellaia?

Ornellaia came first – the first commercial vintage was 1985. The first commercial vintage of Masseto was 1987. In 1986 we produced Merlot dell’Ornellaia with its own unique label, but the name Masseto came in 1987.

What makes Masseto so popular?

It has become a magic name. It’s a magic wine because it really has a very, very strong personality. It comes from a special place – the terroir is very important. This makes it unique.

Clay soils, Merlot grape, small production – sometimes it’s described as the Petrus of Italy…

Others are describing it this way. I don’t think it’s very similar – it’s more opulent than Petrus. However, there are similarities in terms of volume. Another similarity is the pricing. Petrus hasn’t followed the same pricing model as other Bordeaux wines. It has increased progressively, but not as fast. It’s exactly the same for Masseto.

Which are the best Masseto vintages?

Masseto is probably better known for its warmer, very powerful vintages: 2001, 2006, 2011 and 2012 – but cooler vintages like 2007, 2010 and 2013 result in very fine wines that are not as powerful. The ratings are often just as high for these vintages as the warmer years, especially 2010. We didn’t expect this because it didn’t have the same power.

The 2012 is very fruity – it’s elegant and very good. 2013, I think, is just behind 2010. It’s a wine that you can probably drink earlier than you would drink the 2001 or 2006. It shows wonderful elegance, finesse, and depth.

Do you feel that any of your vintages have been underrated by critics?

2007 was a very elegant wine that I loved, but it didn’t get the ratings we expected – 96 points from the Wine Advocate.

What does Parker’s retirement mean for you?

It doesn’t matter to us because we haven’t built our brands around any one wine writer. I don’t think there will be anybody as powerful as Robert Parker in the future. There will probably be three or four publications like Wine Advocate, but none as important. One is Wine Spectator which caters for consumers interested in wines at lower price points. Antonio Galloni is very highly regarded in America, as is James Suckling. The Italian critics have slightly lost their clout – their ratings are more complicated and people don’t understand as easily; the Americans are very pragmatic with their 100-point scores.

Is there a danger that we have too many good vintages these days? The days of the 70s and 80s, where you had a variety of vintages, are gone. If we don’t have the weaker vintages any more, will we have too much wine?

I believe that this has a lot to do with the economy – you need to look at the vintages in this context. If you look at the 30s and 70s, people didn’t put the same effort in and they didn’t have the technology.

I also think that consumers will increasingly look at the brand before they look at the vintage. The tendency is to look at the brand and say, ‘I am drinking a great wine – what vintage is it?’ rather than looking at the vintage first.

This is partly related to wines being drunk earlier. Once they are sold I think wines are probably drunk within 18 months. You find less old wines in restaurants now, so people will get used to younger wines. Because of all of this, it’s very important that the brand guarantees the absolute quality, and not just the vintage.

In our case, the brand is significantly more important unless you are a serious collector or working in the auction business. I think this puts us in a stronger position than Bordeaux.

Your background – your studies and then your early work – is commercial. Has this informed how you think about wine?

I think that I have addressed wine from the perspective of the consumer, at a very high level, and also as a merchant, rather than just looking at what we produce.

To market the wine you need to have the best wine maker who is also be able to present themselves, and no-one can do the job of presenting themselves unless he knows what he is talking about. You can’t just rely on public relations.

So you need the economists and the wine maker. The other thing that is very important is to build a team who work together – completely together – from the vineyards to the final consumer.

It is also important to talk to the key quality collectors in the world. We’ve been very good at doing that with the press.

To produce a great wine, you also the need to help of the economy to make it greater – great wine costs more than simple wine. You cannot take shortcuts at anything. Value comes from the consumer. It doesn’t come from cutting cost. It comes from getting a better price.

Does the way you think set you apart from other producers in Tuscany?

Yes, very much so. Most of the wines are being produced by producers. They think of the cost first – it’s seen as an agriculture business first and foremost. You have to understand what it means to build value.

So a lot of people focus on producing the best wine and then as a secondary thought they have to go on and sell. But they think of just selling it – but not going beyond this and communicating with collectors, and so on. They don’t think they have time to do it – maybe they are too small, but then they stay small.

You can produce a great wine at a low price just with good skills in the vineyard. And if you let the world sell it for you and the market sell it for you, it’s not such a bad business…

Yes, but you are looking at running a business just to have enough money to make a good living.

To establish a brand with more value for long term investors, for your family and for your country – because a brand is something valuable even for your country – requires more than this.

Top fashion labels understand that they are brands, not just textile producers making t-shirts. At that point they change from being a company of ten to a company of 1,000. A company like Loro Piana, which is now part of LVMH, is valued in the billions. They were t-shirt producers before.

After understanding this, a similar thing happened to wine producers in Tuscany. They had to move to the next level with merchants and with the consumer because that’s where the value starts.

[Every year since the release of Ornellaia 2006 in May 2009, a contemporary artist creates a work of art and a series of limited edition labels drawing inspiration from the single word chosen by the Winemaker to describe the character of the new vintage. A limited number are created and sold at auction.]

We have a curator who has been with us since the beginning. He’s a curator professionally – he’s worked all over the world – and he happens to be the brother of my brother-in-law. We start by defining the character of the vintage – brainstorming together – but he does it mostly. On that basis we look for an artist. It’s a challenging thing to do because great artists are very difficult. It’s a tough job!

This helps us to present the wines and talk about the vintage in a different way.

What would you consider to be the greatest achievement in your career?

As a company, I would say the growth of Ornellaia and Masseto and the separation of the two brands, which is not complete and will take a lot of time – you need separation of people and the brand, and most importantly you need your own winery. Many of the important things in the world are defined in this way. You think of the White House, you think of St Peter’s – the building itself is very important. Without having its own winery, Masseto remains a wine and not an estate. And so building one must happen.

But if you take Ornellaia and Masseto as a whole and the development of the brands in particular, they probably represent my greatest achievements.

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This month, the Liv-ex indices have continued to rise. The Liv-ex 100 – the industry leading benchmark – is currently at its highest level in five years and the Liv-ex 1000 – the broadest measure of the market – has reached record highs for four consecutive months. However, this week momentum slowed for the Liv-ex Fine wine 50 – tracking the daily price movement of the First Growths – which dropped 0.1% for the second week in a row.

After a strong week, trade for Champagne and Italy dipped this week. Bordeaux activity climbed to 76.2% and the Rhone and the ‘Others’ both saw an increase in trade.

Carruades Lafite 2014 was the highest traded wine by value this week. The 2011 vintage also saw high levels of activity and earlier this month traded at an all-time high of £1,744 per 12×75.

The high scoring Pape Clement 2012 (WA 97) continues to trade well by both value and volume. The wine was the most traded by volume this week and saw a flurry of activity on the Exchange towards the end of November. Robert Parker describes the wine as “a candidate for near-perfection as well as one of the wines of the vintage”.

Looking for weekend reading? This week, we published an interview with Giovanni Geddes da Filicaja, CEO of Ornellaia and Masseto. In the interview Giovanni discusses business strategy, the fine wine market and the relationship between Ornellaia and Masseto.

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The Liv-ex 1000 Index – the broadest measure of the fine wine market – closed November 2016 at a new high of 296.60. This is an increase of 1.02% on October’s close of 293.60. It has now reached record highs for four consecutive months.

The index previously reached a high of 297.69 in July 2011 at the peak of the China-led bull market. It then fell 13.3% before hitting a low of 242.6 in August 2014.

The fine wine market has been rising since the end of last year. It received a marked boost after June 24 when the UK voted to leave the EU. A weaker Sterling has encouraged buying from Euro and Dollar-based merchants.

Amongst the Liv-ex 1000 sub-indices, Bordeaux has been leading the charge. The Bordeaux Legends 50 (+24.5%) and the Liv-ex Bordeaux 500 (+22.7%) have increased the most this year. However, the Champagne 50 (+3.9%) and Burgundy 150 (2.5%) are closing the gap after making strong gains this month. The Italy 100 (-1.0%) and Rhone 100 (-0.6%) continue to lag behind having recorded small declines this month.

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The Liv-ex Fine Wine 100 Index closed November on 296.19, up 1.6% on the previous month. The index has now risen for an unprecedented twelve consecutive months and is up 23.8% year-to-date. It is now at its highest level in five years.

The two top movers last month were from Champagne and Tuscany, with Taittinger Comtes 2004 (WA 96) and Ornellaia 2009 (WA 97) increasing by more than 9%.

The pace of the market appears to be slowing slightly and there seems to be no set pattern in risers and fallers. In November, Masseto 2010 (WA 98) and Beaucastel 2012 (WA 96) pulled back from their significant gains of previous months. Overall the market strength appears robust, but as we head towards 2017, it remains to be seen whether the long period of sustained gains will continue.

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Giovanni Geddes da Filicaja is the CEO of Ornellaia and Masseto. Liv-ex recently caught up with him to find out more about his work and views on the world of wine. In the first part of the interview, published below, Giovanni discusses business strategy, the fine wine market, and the relationship between Ornellaia and Masseto.

How did you get into the wine business? What brought you to Ornellaia e Masseto?

I didn’t go straight into wine. I started at an import company, then became involved in Remy Martin. So I was focused on spirits and Champagne rather than wine specifically. But I had always been interested in wine: my family had wine properties and land, though we didn’t produce commercially.

When I moved into wine – first to Antinori, then as a consultant, and then to Frescabaldi – I became more and more interested in the wine, particularly looking at where there were opportunities in Tuscany to produce some of the greatest wines in the world. I think Ornellaia and Masseto are now recognised as two of the great wines of the world, and they’ve grown a lot. Since I became CEO, the company’s revenue has increased six-fold.

Is this because of increased production?

It has been partly through increased production but mostly through adding value. Masseto’s increase is all about its value. The largest volume ever made by Masseto was in 1999 when we made 38,500 bottles. Now we produce around 30/32,000 bottles.

Ornellaia’s increase has been about both production and value.

How has the pricing of your wines evolved over time?

We don’t change our price according to the character of the vintage. Instead, we change it consistently with the market. We’ve never decreased the price, only gone up or remained stable. For example, our current release price is 3.5 times higher than of the 2001 vintage.

What if the market went down?

We have to be very careful with the volume that we want to put on the market. For all our Ornellaia wines. This means maintaining and building demand which is bigger than what we ship.

So take 2001 for instance. The economy wasn’t strong at all. The wines did not have the image they have today, and so I decided to hold back Ornellaia – about 30% – and sell it over the years, but not reduce the price.

In 2002 I reduced the quantity of Ornellaia. We produced a lot more of Le Serre Nuove, the second wine, but never reduced the price. We remained stable with the price until 2005, and then we moved on.

Is there a ceiling?

Masseto is a real collectable. With the current volumes – and it will stay at that volume – it will remain collectable.

Still, there is a lot more consumption than one might think because a lot of very wealthy people are drinking it. For them the prices aren’t too high, so we still find a lot of Masseto being sold in top restaurants.

If we look at price increases Masseto is up by about 50% in the USA over the past three years. Petrus has increased by about 10%. But Petrus is two thousand dollars; we are seven or eight hundred dollars – so there’s still a gap.

Ornellaia is produced in higher volumes. It keeps growing: the standard price now varies from $200-220. In restaurants it is very high – beyond $500 in top New York restaurants.

What happens to the Masseto grapes that don’t make it into Masseto?

The Masseto vineyard has an excellent capacity to produce perfect grapes, so we are talking about a very, very small portion of the grapes that don’t go in Masseto.

How did you go about defining the relationship between the two wines?

Strategically, my point was that Masseto would be a very different wine from Ornellaia, with a completely different label. It would be more expensive, with the opportunity to be the very top wine of Italy – and very international in terms of taste and positioning.

I didn’t want Masseto to compete with Ornellaia. I wanted Ornellaia to be the flagship of the estate, and Masseto to become an estate on its own. And in order to achieve that, I started by separating any activities like tastings and so on.

I changed the name of the company from Tenuta dell’Ornellaia to Ornellaia and Masseto. So when we bottle Ornellaia we use ‘bottled by Ornellaia’ and when bottling Masseto we use ‘bottled by Masseto’.

And how about distribution?

The next step was to separate distribution. From the 2006 vintage we started using La Place de Bordeaux, though we also have direct distribution in Italy, the United States and Canada.

Distribution to the rest of the world, with the exception of a very small allocation to Germany and Austria, goes through La Place, which has about 50% of the allocation.

The growth has been fantastic. I had followed Opus One – David Pearson [CEO of Opus One] is a very good friend. We discussed distribution on a number of occasions. La Place has done a fantastic job for Opus One’s wine, and it’s doing a fantastic job for us as well with Masseto.

What makes La Place so successful?

They have a lot of history, and this has given La Place knowledge of really good buyers – the top buyers of the world.

We have a different history in Italy – there is no comparable system, so we have had to market the brands on our own.

I don’t think that La Place could work as well with a wine that is not established already – they don’t have the means to promote it. However once the wine is established, they can do a fantastic job. Now, within say the first two to four days, they will sell something like 70% of the Masseto allocation.

By the end of November last year, 88% was sold. This was due to repeat demand from several customers – we have over four hundred customers buying from La Place nowadays.

Does it matter where – which countries – your wine is sold?

It does and it doesn’t. We try to spread out our distribution, but ultimately it ends up where the market demands, and that is fine.

La Place give us all the data – they tell us which countries they have sold the wine to, by country.

Has this changed in the past decade?

Yes it has, very much so. Asia is much more important than it used to be.

Bordeaux experienced problems from mid-2011. Demand from Asia had priced European buyers out of the market. When this demand died down, it was not possible to sustain prices…

About 15% of our sales are accounted for by Asia and this is very much concentrated in Hong Kong and China. This is a much smaller percentage than is sold in Italy. Europe as a whole is huge for us Germany, Switzerland and the UK in particular. We could sell more to the UK, but we limit it – otherwise half would go to the UK and then spread out around the world again. So it is quite balanced.

Do you ever offer older vintages direct from the estate?

This year we auctioned wines from the cellars of Ornellaia. These were wines that had never left the winery before, so we put them in slightly different packaging to indicate this – something that was particularly attractive to collectors. We sold them at three different auctions in New York, London and Hong Kong. The greatest success was in Hong Kong, then New York and then London.

Masseto and Ornellaia regularly trade on Liv-ex. What is your view on this?

I think it’s a good thing. It shows that there is demand.

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In October Liv-ex looked at the relationship between the prices of First Growths and their second wines, noting that it is currently possible to buy 3.3 bottles of second wines for every first (on average). This number has decreased in the last decade as brand buying has pushed the prices for second wines higher.

Beyond the Premier Crus, the price ratio between first and second wines of estates is slightly higher. It is possible to buy 4.3 bottles of the Echo de Lynch Bages and Le Petit Lion (Leoville Las Cases) for each bottle of their respective first wine, as the chart above shows.

The second wines of Cos d’Estournel and Pichon Lalande are more expensive relative to their firsts with ratios of 3.4 and 3.3 respectively. Of the second wines shown, Padogas Cos has the highest average Market Price of £350 per 12×75.

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So far, 2016 has been a year of ‘ups’ for the fine wine market – when measured in Sterling, at least. This was the subject of a post (“One Direction…”) at the beginning of the week, and was also the subject of discussion when Liv-ex MD James Miles appeared on Bloomberg this Tuesday evening. However, this week momentum slowed and the Liv-ex Fine Wine 50 – tracking the performance of the First Growths – drifted 0.1%. Bordeaux’s trade share also slipped to 64.3%.

Elsewhere the picture was a little brighter. Italy continued to see high levels of activity on the market at just under 10% by value. Sassicaia in particular had a busy week. 2013 was its star performer in terms of trading activity by value, coming in third overall. Meanwhile, three of its vintages – 2003, 2008 and 2009 – traded at record highs. Those interested in finding out more about Sassicaia can read Jane Anson’s article for Decanter, published on Thursday.

It wasn’t slow across all of Bordeaux this week, however. Today, Pavie 2000 traded at a record high of £5,000 per 12×75. The wine was first awarded 100 points from Robert Parker back in 2003 and has seen steady upward movement since. In Parker’s latest review of the wine, he noted that it is “just beginning to come around and strut its enormous potential”. Buyers seem to be taking note.

Looking for weekend reading? This week, we published the second part of our interview with Bordeaux winemaker and consultant Michel Rolland. In it, we discuss the Bordeaux market and wine criticism. You can find it here. In the first part – here – Rolland discusses his career and winemaking philosophy.

This blog is provided for informational purposes only and does not amount to financial advice or advice as to the value or likely future values of any of the wines it discusses. The opinions expressed are subject to change without notice. Neither Liv-ex Ltd nor any of the authors or editors accept any liability for the accuracy of its contents.